How Expecting Parents Can Prepare Their Finances
The birth of a child is an exciting and life-changing time for couples. Your priorities will undoubtedly change when you bring a son or daughter into the world. While having a child can be rewarding, it can also be costly. That’s why it’s important to plan ahead so that you aren’t blindsided by the costs of raising a child. Here are some ways expecting parents can prepare their finances for a new child.
Adjust Your Budget
First and foremost, you’ll want to adjust your budget. Run some numbers ahead of time and see how your new bundle of joy will affect your budget. To meet your financial goals like homeownership and retirement, you’ll want to keep saving. (And start saving in the case of RESPs, which we’ll talk about next.) So, look for ways to cut back on spending to keep saving when your child is born.
Get a Head Start on Your Child’s RESP
An RESP may not be top of mind when your child is born, but it should be. You can start contributing to your child’s RESP in the year they are born and the years that follow. By contributing $2,500 per year, you’ll maximize the gains and accumulate the most amount of money to help cover the rising cost of post-secondary education.
But not everyone can afford to contribute to an RESP right off the bat. Early years in your child’s life are precious but can also be expensive. If you don’t anticipate having enough money to contribute, why not ask family and friends for money to contribute towards your child’s RESP as a gift and get a head start? By getting in the habit of maximizing your child’s education, your child will be well on their way to a fully paid-for post-secondary education.
Review Your Family’s Insurance Needs
A major life event like the birth of a child is the perfect time to assess your insurance needs. Start by taking the time to review the insurance you already have. If you work for an employer, you likely have life and disability insurance, but is it enough? What if something were to happen to your partner or you, or both? Would your child be financially taken care of? Let’s be frank – life insurance isn’t the easiest thing to understand, so it might be wise to get a second opinion from an independent insurance broker to see if you would be wise to purchase more protection.
Look at Your Family’s Housing Needs
Also, consider your family’s housing situation. Do you have enough room? If not, you’ll want to plan for moving to a bigger property. That’s when it makes sense to speak with a trusted mortgage broker.
If your partner or you are planning to go on maternity or paternity leave, you might want to consider moving to a new property beforehand, as some lenders won’t count your full salary while away from work. By working with a mortgage broker who knows his stuff, he can help find the lender that works with your financial situation.
Update Your Will
The vast majority of Canadians know that they need a will, yet only about half of us have one. Life is full of surprises. You could get a job promotion, decide to travel the world or suddenly pass away. You never know. If it’s the last one, you’ll want to make sure your loved ones, especially your new child, is financially taken care of. Besides life insurance, the best way to do that is a will. Make an appointment with a lawyer to draft a will when your child is on the way.